Christie CV's Bill Giving Cops, Firefighters More Control Over Pensions

Gov. Chris Christie has conditionally vetoed a bipartisan bill seeking to give New Jersey’s police officers and firefighters more say over how their pensions are managed. Now it’s up to legislative leaders to decide whether they can accept his numerous recommendations or try for an elusive override.

Had he signed it outright, the bill that Christie sent back to the Legislature yesterday afternoon would have created a new board of trustees to administer the New Jersey Police and Firemen’s Retirement System, a proposal that came from union officials in response to their growing frustration with how their retirement fund has been managed by the state in recent years.

But Christie’s recommendations significantly overhaul the version of the bill that passed both houses of the Legislature with bipartisan — and veto-proof — support earlier this year.

For example, Christie is seeking to give local-government employers equal say on the proposed new PFRS board, and is also using the conditional veto to make a new call for capping how much police officers and firefighters can collect for unused vacation and sick days when they retire. Christie’s conditional veto would also require the new board to follow a series of changes that were established in a major 2011 benefit-reform law, including a set of specific employee-contribution rates, and it would also subject the new PFRS board to the state’s open-records and open-meetings laws.

A nonstarter

Those changes could be a nonstarter for Democrats, while at the same time offering Republicans a better option than voting to override the second-term GOP governor. A Christie veto has never been overridden by both houses of the Legislature during his tenure despite dozens of attempts.

The initial version of the PFRS bill had strong support from several major public-safety unions, but union officials said in a statement yesterday that they’re now looking forward to early next year, when the governor will leave office due to New Jersey’s constitutional term limits. Democratic legislative leaders also said they were disappointed with Christie’s action, but his conditional veto drew strong praise yesterday from representatives of the state’s county and municipal governments.

In all, the $72 billion state pension system is made up of seven different retirement funds, representing employee groups like teachers, judges, and police officers and firefighters. Some of the funds are in better shape than others; the PFRS is in the best shape, funded at 70 percent, while the overall pension system is funded at 56.5 percent, according to the latest official actuarial reports.

Though the legislation proposing to take PFRS investing decisions out of the hands of the state Division of Investment was introduced for the first time earlier this year, union officials said they’ve been exploring the idea for the past several years. Their effort also came amid growing frustration with lackluster returns achieved in recent years by the DOI under policies set by the New Jersey State Investment Council.

Hedge funds

Concerns have also been raised by union members about a reliance on investments in hedge funds and other so-called alternative investments that require fees to be paid to outside fund managers. Those fees went up slightly during the 2016 fiscal year, from $415.6 million to $417 million, even as the overall pension system lost value.

Under the bill that lawmakers sent to Christie in late March, a new 12-member board would be created to oversee the PFRS, with seven members representing the interests of police officers and firefighters, and five representing the interests of state, county, and municipal governments. The proposed new PFRS board would also take over management of the retirement fund from the state, getting the power to hire its own executive director, actuary, chief investment officer, and ombudsman. Decisions related to pension contributions would also fall to the new board under the original version of the bill.

Representatives of the New Jersey League of Municipalities and New Jersey Association of Counties opposed the bill as it moved through the Legislature, arguing that it gave too much power to the unions at the expense of taxpayers who foot a larger percentage of the overall pension obligation. And they raised concerns that if the new board’s investment decisions soured, it would be up to taxpayers to bail out the PFRS.

Christie seemingly agreed in his conditional veto, remaking the proposed PFRS board to a 14-member panel with equal representation among the unions and government employers. Such a makeup “more accurately represents stakeholder interests and ensures that local municipal officials have an appropriate voice in decision-making,” Christie said in the CV.

“In addition, this more balanced board will require greater consensus, infusing moderation into the debate and decision-making process,” he said.

Unused vacation and sick time

Another major recommendation is Christie’s insistence that in exchange for gaining more control over their retirement fund that the police officers and firefighters accept a cap of $7,500 on unused vacation and sick time. Though Christie and lawmakers have previously tried to reach agreement on establishing some kind of cap on payouts for public employees — which some see as a major factor in New Jersey’s record-high property tax bills — they have yet to strike a deal that both sides could accept. NJ Spotlight reported several weeks ago that the statewide tab for such payouts to public employees now totals near $2 billion.

“Despite the potential significant impact of this bill, I am willing to grant PFRS greater independence. But, in return, I seek sufficient guardrails that adequately protect pensioners and taxpayers, and long-awaited reform of runaway sick pay benefits,” Christie said in the CV.

Christie’s decision to reject the original bill angered union officials yesterday. A joint statement issued by the leaders of the New Jersey State Policemen’s Benevolent Association, New Jersey State Fraternal Order of Police and New Jersey State Firefighters’ Mutual Benevolent Association accused Christie of inserting a series of “poison pills” into his conditional veto to ensure the push to separate the PFRS from the broader state pension system doesn’t go forward.

“Thankfully he will no longer be governor in eight months and we look forward to moving this commonsense proposal when his time in Trenton mercifully comes to an end,” the statement said.

What happens next?

But it’s still unclear exactly what will happen next in the Legislature. Since the bill originated in the Senate, any override attempt would have to begin there. Senate President Stephen Sweeney (D-Gloucester) said in a statement yesterday that Christie’s action was “extremely disappointing,” but he didn’t indicate whether he would soon attempt an override. Assembly Speaker Vince Prieto (D-Hudson) also said in a statement that he, too, was “disappointed.”

But representatives of both the New Jersey State League of Municipalities and the New Jersey Association of Counties praised the governor for proposing meaningful changes and urged lawmakers to vote to endorse them.

“It’s not equitable for our property taxpayers to carry all the risk with little control and that’s why putting our taxpayers on equal footing is vital,” said Michael Darcy, executive director of the League of Municipalities.

“The governor’s recommendations not only improve the existing proposal, but he has also advanced important sick pay reform to offer further taxpayer protections,” said John Donnaddio, executive director of the Association of Counties.